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The Economics of Early Childhood Investments

April 7, 2015 Comments off

The Economics of Early Childhood Investments (PDF)
Source: Council of Economic Advisers

Early childhood, beginning in infancy, is a period of profound advances in reasoning, language acquisition, and problem solving, and importantly, a child’s environment can dramatically influence the degree and pace of these advances. By supporting development when children are very young, early childhood development and education programs can complement parental investments and produce large benefits to children, parents, and society.

An analysis by the President’s Council of Economic Advisers describes the economic returns to investments in childhood development and early education. Some of these benefits, such as increases in parental earnings and employment, are realized immediately, while other benefits, such as greater educational attainment and earnings, are realized later when children reach adulthood. In total, the existing research suggests expanding early learning initiatives would provide benefits to society of roughly $8.60 for every $1 spent, about half of which comes from increased earnings for children when they grow up.

Big Data and Differential Pricing

April 7, 2015 Comments off

Big Data and Differential Pricing (PDF)
Source: Council of Economic Advisers

Big data refers to the ability to gather large volumes of data, often from multiple sources, and with it produce new kinds of observations, measurements and predictions. Commercial applications of big data deserve ongoing scrutiny given the speed at which both the technology and business practices are evolving. One of the many questions raised by big data is whether companies will use the information they harvest to more effectively charge different prices to different customers, a practice that economists call price discrimination. Economics suggests that many forms of differential pricing, such as senior citizen discounts at the box office or tiered pricing for air travel, can be good for both businesses and consumers. However, the combination of differential pricing and big data raises concerns that some consumers can be made worse off, and have very little knowledge why. This report finds that many companies already use big data for targeted marketing, and some are experimenting with personalized pricing, though examples of personalized pricing remain fairly limited. While substantive concerns about differential pricing in the age of big data remain, many of them can be addressed by enforcing existing antidiscrimination, privacy, and consumer protection laws. In addition, providing consumers with increased transparency into how companies use and trade their data would promote more competition and better informed consumer choice.

White House — The Student Aid Bill of Rights: Enhancing Protections for Student Loan Borrowers

March 11, 2015 Comments off

The Student Aid Bill of Rights: Enhancing Protections for Student Loan Borrowers
Source: White House

President Obama has proposed a new Student Aid Bill of Rights that outlines a series of new actions that direct the Department of Education, Department of Treasury, Office of Management and Budget, Office of Science and Technology Policy and Domestic Policy Council, working with the Consumer Financial Protection Bureau and the Social Security Administration, to make paying for higher education an easier and fairer experience for millions of Americans.

Working together, the Obama administration will:

  • Develop a state-of-the-art – and simple – process for borrowers to file complaints involving their federal student aid, and working with a team across the federal government to figure out the best way to address those complaints.
  • Make sure the banks that service federal loans are held to high standards and provide better information to borrowers; and raising the bar for debt collection to make sure that fees charged to borrowers are reasonable and that collectors are fair, transparent, and help borrowers get back on track.
  • Use innovative strategies to improve borrowers’ experience and improve customer service. At the Department of Education, we are committed to finding new and better ways to communicate with student loan borrowers and to creating a centralized, easier process for repaying loans. And we will see what changes to regulations and legislation, including bankruptcy law, may be necessary to protect borrowers – regardless of the type of loan they have.
  • Work across the federal government to see what lessons can be learned from similar situations, like mortgage and credit card markets and other performance-based contracts, to help us make sure that ultimately, we are continually strengthening consumer protections for students.

The Effects of Conflicted Investment Advice on Retirement Savings

February 24, 2015 Comments off

The Effects of Conflicted Investment Advice on Retirement Savings (PDF)
Source: Council of Economic Advisors
From blog post (Whitehouse.gov):

Americans’ retirement income is derived from many sources, including Social Security, traditional pensions, employer-based retirement savings plans such as 401(k)s, and Individual Retirement Accounts (IRAs). While this landscape is familiar today, it reflects a dramatic change from the landscape 40 years ago. The share of working Americans covered by traditional pension plans—which offer a guaranteed income stream in retirement—has fallen sharply. Today, most workers participating in a retirement plan at work are covered by a defined contribution plan, such as a 401(k). Importantly, the income available in retirement from a defined contribution plan depends on both the amount initially saved and the return on those savings. The shift from traditional pensions to defined contribution plans raises important policy issues about investment responsibilities and the roles of individual households, employers, and investment advisers in ensuring the retirement security of Americans.

Defined contribution plans and IRAs are intricately linked, as the overwhelming majority of money flowing into IRAs comes from rollovers from an employer-based retirement plan, not direct IRA contributions. Collectively, more than 40 million American families have savings of more than $7 trillion in IRAs. More than 75 million families have an employer-based retirement plan, own an IRA, or both. Rollovers to IRAs exceeded $300 billion in 2012 and are expected to increase steadily in the coming years. The decision whether to roll over one’s assets into an IRA can be confusing and the set of financial products that can be held in an IRA is vast, including savings accounts, money market accounts, mutual funds, exchange-traded funds, individual stocks and bonds, and annuities. Selecting and managing IRA investments can be a challenging and time-consuming task, frequently one of the most complex financial decisions in a person’s life, and many Americans turn to professional advisers for assistance. However, financial advisers are often compensated through fees and commissions that depend on their clients’ actions. Such fee structures generate acute conflicts of interest: the best recommendation for the saver may not be the best recommendation for the adviser’s bottom line.

CEA’s new report The Effects of Conflicted Investment Advice on Retirement Savings examines the evidence on the cost of conflicted investment advice and its effects on Americans’ retirement savings, focusing on IRAs. Investment losses due to conflicted advice result from the incentives conflicted payments generate for financial advisers to steer savers into products or investment strategies that provide larger payments to the adviser but are not necessarily the best choice for the saver.

The 2015 Economic Report of the President

February 19, 2015 Comments off

The 2015 Economic Report of the President
Source: Council of Economic Advisers

This morning, the Council of Economic Advisers released the 69th-annual Economic Report of the President, which reviews the United States’ accelerating recovery and ways to further support middle-class families as the recovery continues. The economy is recovering from the Great Recession at an increasing pace, growing at an annual rate of 2.8 percent over the past two years, compared with 2.1 percent over the first three-and-a-half years of the recovery. The speed-up is especially clear in the labor market, where job gains have reached a pace not seen since the 1990s. But it is essential that a broad range of households benefit from the United States’ resurgent growth, so this year’s Report focuses on factors that are important to middle-class incomes: productivity, labor force participation, and income inequality. The President’s approach to economic policies, what he calls “middle-class economics,” aims to improve each of these long-standing elements and ensure that Americans of all income levels share in the accelerating recovery.

FACT SHEET: Progress in Our Ebola Response at Home and Abroad

February 13, 2015 Comments off

FACT SHEET: Progress in Our Ebola Response at Home and Abroad
Source: White House

Today, approximately 10 months since the first U.S. personnel deployed to West Africa to fight Ebola, we mark important milestones in our response to the epidemic and chart the way ahead. In keeping with the President’s charge that we tackle Ebola as a national security priority, we built, coordinated, and led an international response—involving thousands of personnel, both U.S. and international, civilian, and military—to fight the disease at its source. All the while, we enhanced our preparedness to encounter Ebola on our shores, establishing comprehensive measures to screen and detect the disease in travelers, while strengthening our capacity to diagnose, isolate, and treat any patients safely. This response showcased American leadership at its finest on the world stage, just as we came together as a nation to fortify our domestic resilience in the face of understandable apprehension. To be sure, our tasks are far from complete; we will keep working to meet this challenge until there are zero cases in West Africa and our domestic infrastructure is fully completed. Our focus now turns to consolidating that substantial progress as America today marks the next phase of our response.

Remarks by the President on Request to Congress for Authorization of Force Against ISIL

February 12, 2015 Comments off

Remarks by the President on Request to Congress for Authorization of Force Against ISIL
Source: White House

Today, my administration submitted a draft resolution to Congress to authorize the use of force against ISIL. I want to be very clear about what it does and what it does not do.

This resolution reflects our core objective to destroy ISIL. It supports the comprehensive strategy that we have been pursuing with our allies and partners: A systemic and sustained campaign of airstrikes against ISIL in Iraq and Syria. Support and training for local forces on the ground, including the moderate Syrian opposition. Preventing ISIL attacks, in the region and beyond, including by foreign terrorist fighters who try to threaten our countries. Regional and international support for an inclusive Iraqi government that unites the Iraqi people and strengthens Iraqi forces against ISIL. Humanitarian assistance for the innocent civilians of Iraq and Syria, who are suffering so terribly under ISIL’s reign of horror.

The resolution we’ve submitted today does not call for the deployment of U.S. ground combat forces to Iraq or Syria. It is not the authorization of another ground war, like Afghanistan or Iraq. The 2,600 American troops in Iraq today largely serve on bases — and, yes, they face the risks that come with service in any dangerous environment. But they do not have a combat mission. They are focused on training Iraqi forces, including Kurdish forces.

As I’ve said before, I’m convinced that the United States should not get dragged back into another prolonged ground war in the Middle East. That’s not in our national security interest and it’s not necessary for us to defeat ISIL. Local forces on the ground who know their countries best are best positioned to take the ground fight to ISIL — and that’s what they’re doing.

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